Govt to guarantee $200m for financing oil imports

Rezaul Karim | Published: May 14, 2016 00:00:00 | Updated: February 01, 2018 00:00:00

The government will issue a US$200 million counter-guarantee to the central bank for financing oil imports by Bangladesh Petroleum Corporation (BPC), officials said.
A top finance official said the fund would be sourced from the International Islamic Trade Finance Corporation (ITFC), which requires a guarantee from the central bank and a counter- guarantee from the government.
"We will issue counter-guarantee of $200 million in favour of Bangladesh Bank to facilitate BPC's oil import and operations sometime next week," he told the FE.
In this connection, the Energy and Mineral Resources Division sought counter-guarantee for the ITFC loan last week.
"The counter-guarantee issued by the finance ministry will be considered a sovereign guarantee," the official said, explaining that the government took the responsibility of repaying the amount itself to the ITFC if the petroleum corporation failed to pay back the borrowed money.The tenure of the loan is six months and total mark-up of the loan is 4.20 per cent annually, according to the Division.
In 2015, a total of U$1,000 million ($1.0 billion) was approved by the standing committee on non-concessional loan from the ITFC.
"Lending from third banks to open letter of credits (LCS) is time- consuming. As a result, the BPC, generally, takes loan from ITFC in importing crude oil," General Manager (Finance) of BPC Moni Lal Das told the FE.
It's mandatory for the corporation to report to the ministry on its portfolio on supplier's credits or any other short-term foreign loan.
The corporation will have to inform the ministry regularly about its credits if taken from local banks or financial institutions, says an office order of the finance ministry.
The corporation imported around 5.50 million tonnes of crude oil and refined oil products combined in 2015.
Earlier, the state entity had incurred losses in buying fuel oils from the international market at higher rates and marketing to domestic consumers at cut prices. Presently, it makes profit following price fall on the international market to a rock bottom.
Of the imports, 1.4 million tonnes were crude oil that BPC imports under term contracts with Saudi Aramco and Abu Dhabi National Oil Company, or ADNOC, for the country's sole refinery.
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